In the cryptocurrency industry, the concepts of buy wall and sell wall are associated with the health of a particular currency in the market. Investors can access the potential value of their investments by analyzing the buy-wall and sell-wall data.
How Does Buy Wall and Sell Wall Work?
Before we delve deep into understanding what a buy wall and sell wall are, let us understand about an order book in the case of crypto transactions. The order book is a place where all data about the buying and selling of cryptocurrency is noted down.
It contains details about the buyer and seller orders, the prices at which they were carried out, and the total amounts involved. All these data are documented in table format and are actively updated.
A buy wall is activated when the buying orders for a cryptocurrency are higher than the selling order for the same cryptocurrency. More number of buying orders signifies high demand for a particular cryptocurrency and may cause its price to rise.
A whale activity may also result in a buy wall. On the contrary, a sell-wall is formed when there are more selling orders than buying orders. This can happen if a whale investor decides or more investors come together to sell their holdings in a particular cryptocurrency.
Buy walls or sell walls can also be signs of market manipulation and can happen particularly in the case of crypto coins with less liquidity.
Such manipulations are possible in the case of coins traded using automated systems or that largely depend on the demand and supply metrics rather than other factors.
How to Identify Buy Walls and Sell Walls?
To make the right investment decisions in terms of cryptocurrencies you must be able to identify whether there is a buy wall or sell wall associated with the cryptocurrency you are planning to invest in.
The buy and sell orders are plotted on the market depth chart. The x-axis represents the buy orders and sell orders whereas the y-axis represents the cumulative market volume. The buy wall or sell wall is plotted along the x-axis.
Buy walls are represented in green and sell walls are presented in red. You can identify whether the trend is toward buying or selling a particular cryptocurrency by measuring the depth of the concerned wall.
If there is a big buy wall against a considerably small sell wall, the indication is favorable for a strong demand for the concerned cryptocurrency in the market. There is very little resistance or chance of failure for the cryptocurrency.
On the other hand, if the sell wall is significantly bigger than the buy wall, then you can conclude that the concerned cryptocurrency is not suitable for buying and will cause you failure in the market if you buy it.
However, the market depth chart as well as the buy wall and sell wall are subject to sudden changes based on the market risks or other factors such as a sudden whale activity. So you must keep a check on the market depth chart of a particular coin at regular intervals and monitor its activities before finalizing your decision-making
Also, Read: Crypto Wallet Types: How To Choose?
The Bottom Line: The Real Power of Buy Walls and Sell Walls
Do you still doubt if buy walls and sell walls are powerful enough to dictate the outcomes of a cryptocurrency market? They are indeed powerful indicators of the dominant market sentiments of a coin.
A big buy wall indicates the potential buying opportunities for a particular cryptocurrency, its support in the market, and the predominant bullish sentiments associated with the tokens.
On the other hand, sell walls are powerful enough to resist price rises beyond a certain level because the tokens are available for sale at a much lower price.
Buy walls and sell walls are seminal to mark a thorough market activity for a particular currency. If these metrics are absent, then it would be an indication that the cryptocurrency in question does not have significant market activity or there is some kind of uncertainty in the market activities of the token.
They are powerful enough to decide the direction of the market and are valuable indicators of your future success or failure.
